Market Entry Strategy free essay sample

Anna’s Car is one of the top automakers in the United States that is currently planning on selling its new revolutionized Smart Cars to two foreign countries, Japan and Germany. The company believes that the increasing trend of going green and concerns about the environment in Japan and Germany will merge significant profits shortly after entering those two markets. Anna’s Car has evaluated various market entry strategy alternatives and is now hesitating between direct exporting or foreign direct investment for Germany and franchising or joint venture for Japan. Direct Export The main advantage of direct exporting for Anna’s Car is going to be fact that the company will be able to produce Smart Cars in the United States and then sell them to customers in Germany. Anna’s Car would have a great control over the entire export transactions and would gain the freedom as far as deciding which target buyers to approach or who to use to distribute the cars in Germany. We will write a custom essay sample on Market Entry Strategy or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page There is also potential for higher profits and a better chance to build a closer relationship with the German marketplace and its buyers. However, Anna’s Car will have to devote more time, personnel, and company’s resources to ensure a smooth and successful endeavor. Many internal organizational changes will be necessary in order to support more complex functions. The important step will be to choose the best channels of distribution and make business connections in order to sell Smart Cars. However, before exporting cars into Germany, Anna’s Car will need to go through custom procedures which involves filling out customer declarations. Furthermore, the company will need to ensure it carries a CE (â€Å"Communaute Europeenne† which stands for European Community) marking that â€Å"indicates that the respective party has successfully assessed the goods for compliance with European safety standards which has to be accompanied by a signed Declaration of Conformity (DoC)† (German Business Portal, 2010). Once selling products in Germany, Anna’s Car will have to pay value added tax – VAT – that all entrepreneurs who are engaged in business that is generating income have to pay. Foreign Direct Investment Anna’s Car may also choose an option of self growth through investing in building and establishing branches and manufacturing facilities in Germany, instead of producing cars in the USA. This form of market entry would lead to increase in profits due to the eligibility of tax cut that is given to those who are interested in foreign direct investment in Germany. However, Anna’s Car first would have to invest a lot of money in opening up factories and sales offices and dedicate a significant amount of time before the business is established in that country. The good news is that Germany has a welcoming attitude towards foreign companies that are interested in direct investment. The German market is open for investments in practically every industry sector, especially in the auto manufacturing industry. According to the Trade Invest â€Å"German law makes no distinction between Germans and foreign nationals regarding investments or the establishment of companies. The legal framework for FDI in Germany â€Å"favors the principle of freedom of foreign trade and payment† (FDI, 2010). In fact, there are more and more international companies that discover Germany due to its security and rewarding investment location. The UNCTAD World Investment Prospects Survey 2009-2011 confirms Germanys reputation as one of the most attractive business locations in continental Europe. Germany ranks second within the EU-15, and seventh internationally in the â€Å"most attractive business locations in the relevant regions 2008-2010 categoryâ€Å"(American Chamber of Commerce, 2010). The Trade Invest explains that study on the attractiveness of the European economic area (2010) also shows that Germany is the number one business location in Europe and even the number five worldwide. Based on this, it will be very advantageous for Anna’s Car to do business in Germany. Franchising Anna’s Car is evaluating an option of buying a franchise of Toyota, Nissan, or Suzuki in Japan. That way there will be less chance of failure in case something goes wrong as Anna’s Car would be buying an established business that has been very successful. Statistics show that â€Å"franchises stand a much better chance of success than people who start independent businesses; independent businesses stand a 70 to 80 percent chance of NOT surviving the first few critical years while franchisees have an 80 percent chance of surviving† (Coltman, 2009). Also, Anna’s Car would receive a lot of help with starting the business and running it afterwards which would be necessary as the company will be performing operations in a foreign country hat has different rules, culture as well as language. Anna’s Car would get all the equipment, supplies and instruction or training needed to start the business. If the negotiations go well, the company would be also able to receive ongoing training or help with management and marketing (for instance, parent company’s national marketing campaigns). Supplies and inventory will cost less than if Anna’s Car was running an independent company. The research shows that â€Å"franchising in Japan has shown a steady growth: the franchising system has been recognized by the Japanese society as a tool of innovation and development for the economy of the country† (Info Franchise, 2007). Starting franchising in Japan may be quite easy as the franchising system is not as regulated – there is no need to get license and register or file a document to become a franchisor. However, in spite of such freedom, Anna’s Car will need to be aware of the Medium-Small Retail Business Promotion Act that enforces some regulations, specifically the tax provisions. Furthermore, Anna’s Car will be able to count on the Japan Franchise Association (JFA) that consists of leading Japanese franchisors and companies which are interested in franchising and whose purpose is to provide help and support to every entrepreneur that wants to start franchising in that country. Joint Venture Another option of entering the Japanese market can be a joint venture in which partners share ownership of a newly created business. The advantages of such entry market for Anna’s Car would be using the ownership’s experience about new market environment, speed, sharing of resources, high profits, and leverage. The joint venture would also enable partners to combine their strengths so they can be more successful in business. However, there are some risks that need to be taken into account too. For example, joint venture partners share not only the rewards but also any losses or there may be a potential conflict between partners which most of the time arise out of cultural differences. The main thing for Anna’s Car before entering into a joint venture will be ensuring that its interests are properly reflected in the joint venture agreement (management responsibilities, shareholder rights, and exit strategies in case one of the partner decides to leave) and that this agreement will be enforceable under Japanese law. Conclusions Anna’s Car has a great potential of becoming very successful in Germany and Japan, especially in times when protecting the environment has become so important in almost every country in the world. The company needs to decide which market entry method is the most suitable for it by firstly evaluating its overall strategy, current resources as well as competitive advantage. Since different regions offer different advantages as well as obstacles, Anna’s Car needs to be able to adapt and acclimatize in those two countries. Also, following the specific rules of entering a foreign country will be crucial in making sure that the company doesn’t get in trouble with the law.